8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  October 25, 2004

VEECO INSTRUMENTS INC.

(Exact name of registrant as specified in its charter)

Delaware	0-16244	11-2989601
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
100 Sunnyside Boulevard, Suite B, Woodbury, New York  11797
(Address of principal executive offices, including zip code)
(516) 677-0200
(Registrant’s telephone number, including area code)
Not applicable.
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 – Financial Information

Item 2.02  Results of Operations and Financial Condition.

On October 25, 2004, Veeco Instruments Inc. (“Veeco”) issued a press release announcing its financial results for the quarter ended September 30, 2004.  A copy of the press release is furnished as Exhibit 99.1 to this report.

Pursuant to General Instruction B.2 of Form 8-K, the information in this report, including the exhibit, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such filing.

Section 9 – Financial Statements and Exhibits

Item 9.01    Financial Statements and Exhibits.

(c)  Exhibits.

Exhibit	Description
99.1	Press release issued by Veeco Instruments Inc. dated October 25, 2004.

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:  October 25, 2004
	VEECO INSTRUMENTS INC.
	By:  /s/ Gregory A. Robbins
	Gregory A. Robbins
	Vice President and General Counsel

3

EXHIBIT INDEX

Exhibit	Description
99.1	Press release issued by Veeco Instruments Inc. dated October 25, 2004.

EX-99.1

EXHIBIT 99.1

NEWS

Veeco Instruments Inc., 100 Sunnyside Blvd., Woodbury, NY 11797 Tel. 516-677-0200  FAX 516-677-0380

FOR IMMEDIATE RELEASE

Financial Contact:  Debra Wasser, VP of IR & Corp. Comm., 516-677-0200, x1472

Trade Contact: Fran Brennen, Senior Director of Marcom, 516-677-0200 x1222

VEECO REPORTS THIRD QUARTER AND NINE MONTH 2004 RESULTS

Woodbury, NY, October 25, 2004 – Veeco Instruments Inc. (Nasdaq: VECO) today announced its financial results for the third quarter and nine months ended September 30, 2004. Veeco reports its results on a GAAP basis, and also provides results excluding certain charges. Investors should refer to the attached table for further details of the reconciliation of GAAP operating (loss) income to earnings excluding certain charges.

Highlights

Veeco’s third quarter 2004 sales were $92.4 million with a net loss of $1.5 million, or   $0.05 per share. Earnings excluding certain charges were $0.05 per diluted share.  The Company’s third quarter orders were $79.5 million.  Results were in line with the Company’s October 12, 2004 preannouncement.

Third Quarter Results

Veeco’s third quarter 2004 revenues were $92.4 million, up 46% from the $63.1 million reported in the prior year third quarter.  Third quarter revenues were down 10% sequentially from $102.9 million in the second quarter of 2004 due to customer postponements and shipment delays in data storage, semiconductor and compound semiconductor.

Metrology revenues were $33.7 million and Process Equipment revenues were $58.7 million. Veeco’s sales by market in the third quarter of 2004 were 29% data storage, 11% semiconductor, 32% compound semiconductor (LED/wireless) and 28% scientific research.  Revenues by region were 33% U.S., 33% Asia Pacific, 18% Europe and 16% Japan.

Veeco’s orders for the third quarter of 2004 were $79.5 million, a 24% increase from the $64.0 million reported in the third quarter of 2003, but down 36% sequentially from the $124.7 million reported in the second quarter of 2004.  Third quarter 2004 Metrology orders were $45.2 million and Process Equipment orders were $34.3 million. Compared to the second quarter, Veeco’s orders for MOCVD equipment from light-emitting diode (LED) manufacturers decreased approximately 70%. This decrease in MOCVD business resulted from spending freezes initiated by many Asian customers at the end of the quarter, as they paused to absorb the significant amount of Veeco equipment purchased in the first half of 2004.  Veeco’s data storage and semiconductor orders declined approximately 30% from the second quarter, while scientific research orders increased approximately 20% from the same period.  Veeco’s orders by market in the third quarter were 24% data storage, 20% semiconductor, 18% compound semiconductor (LED/wireless) and 38% scientific research. Orders by region were 40% U.S., 22% Europe, 22% Asia Pacific and 16% Japan. The Company’s third quarter book-to-bill ratio was 0.86 to 1.0.

Veeco’s third quarter 2004 operating loss was $0.4 million compared with an operating loss of $1.8 million in the third quarter of 2003.  Veeco’s third quarter 2004 earnings excluding certain charges before interest, income taxes and amortization (“EBITA”) were $3.9 million compared to $3.3 million in the third quarter of 2003. Veeco’s third quarter 2004 net loss was $1.5 million, or loss of $0.05 per share, compared to a net loss of $2.1 million ($0.07 per share) in the third quarter of 2003.  Excluding certain charges, third quarter 2004 earnings were $0.05 per diluted share compared to $0.03 per diluted share a year ago.

First Nine Month 2004 Results

Veeco’s sales for the first nine months of 2004 were $289.7 million, a 43% increase from the $202.4 million reported in the first nine months of 2003. Metrology sales in the first nine months of 2004 were $117.5 million and Process Equipment sales were $172.2 million.  Veeco’s sales by market for the first nine months of 2004 were 32% data storage, 14% semiconductor, 26% compound semiconductor (LED/wireless) and 28% scientific research.

Veeco’s orders for the first nine months of 2004 were $321.3 million, a 60% increase from the $200.8 million reported in the first nine months of 2003. Nine month 2004 Metrology orders were $119.1 million and Process Equipment orders were $202.2 million. Veeco’s orders by market in the first nine months of 2004 were 28% data storage, 15% semiconductor, 33% compound semiconductor (LED/wireless) and 24% scientific research. The Company’s book-to-bill ratio for the first nine months of 2004 was 1.11 to 1.0.

2

Veeco’s operating income for the first nine months of 2004 was $5.4 million compared with an operating loss of $3.3 million in the first nine months of 2003.  Veeco’s EBITA for the first nine months of 2004 was $20.7 million, compared to $9.5 million in the first nine months of 2003. Veeco’s first nine month 2004 net loss was $0.6 million, ($0.02 per share), compared to a net loss of $4.9 million ($0.17 per share) in the first nine months of 2003.  Excluding certain charges, earnings for the first nine months of 2004 were $0.31 per diluted share compared to $0.08 per diluted share a year ago.

Management Review and Outlook

Edward H. Braun, Veeco’s Chairman and Chief Executive Officer, commented, “As previously announced, Veeco was adversely impacted this quarter by weak, industry-wide capital equipment spending conditions particularly in compound semiconductor and data storage markets.  In response to these conditions, we intend to reduce expenses by 10% in order to improve profitability in 2005.  While we expect our customers’ current capital spending reluctance to continue for several quarters, we believe it will ultimately be outweighed by their need to fund their 2005 new product technology roadmaps and to invest in the expected high growth of next-generation consumer electronics.  Veeco remains well positioned to provide leadership technologies for growth applications in semiconductor, data storage, compound semiconductor and scientific research.”

Veeco currently expects fourth quarter sales in the range of $93-$100 million and orders in the range of $85 to $95 million.  Veeco expects to take a charge of between $4.5 to $5.5 million in the fourth quarter related to the future spending reductions and restructuring and product rationalization costs and in-process R&D write-off related to the acquisition of MTI. The Company currently expects to report a fourth quarter GAAP loss in the range of $0.10 to $0.15 per share. Excluding these charges and amortization, Veeco’s fourth quarter earnings per diluted share are expected to be between $0.05 and $0.10 using a 35% tax rate.

Investor Conference Call/ Webcast

A conference call reviewing these results has been scheduled for 10:00 am Eastern Time this  morning at 1-800-289-0569.  The call will also be webcast live on the Veeco Website at www.veeco.com. A replay of the call will be available until November 1, 2004 at 888-203-1112 or 719-457-0820 using confirmation code 994115 for access, or on the Veeco website.

3

About Veeco

Veeco Instruments Inc. provides solutions for nanoscale applications in the worldwide semiconductor, data storage, compound semiconductor/wireless and scientific research markets. Our Metrology products are used to measure at the nanoscale and our Process Equipment tools help create nanoscale devices. Veeco’s manufacturing and engineering facilities are located in New York, New Jersey, California, Colorado, Arizona and Minnesota. Global sales and service offices are located throughout the United States, Europe, Japan and Asia Pacific. Additional information on Veeco can be found at http://www.veeco.com/.

To the extent that this news release discusses expectations about market condition, market acceptance and future sales of Veeco’s products, Veeco’s future financial performance, or otherwise makes statements about the future, such statements are forward-looking and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made.  These factors include the challenges of continuing weakness in end market conditions and the cyclical nature of the compound semiconductor/wireless, data storage, semiconductor and research markets, risks associated with integrating acquired businesses and the acceptance of new products by individual customers and by the marketplace and other factors discussed in the Business Description and Management’s Discussion and Analysis sections of Veeco’s Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q and current reports on Form 8-K.

-Financial Tables Attached-

4

Veeco Instruments Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2004			2003			2004			2003
Net sales	$	92,367		$	63,144		$	289,738		$	202,372
Cost of sales	53,634			32,845			165,825			108,073
Gross profit	38,733			30,299			123,913			94,299
Costs and expenses:
Selling, general and administrative expense	20,177			15,204			62,137			50,017
Research and development expense	14,462			11,640			43,085			35,507
Amortization expense	4,336			3,262			13,807			9,563
Other expense (income), net	170			146			(471		)	(749		)
Merger and restructuring expense	—			1,804			—			3,261
Operating (loss) income	(412		)	(1,757		)	5,355			(3,300		)
Interest expense, net	1,793			2,050			6,231			5,703
Loss before income taxes	(2,205		)	(3,807		)	(876		)	(9,003		)
Income tax benefit	(750		)	(1,692		)	(298		)	(4,056		)
Net loss	$	(1,455	)	$	(2,115	)	$	(578	)	$	(4,947	)
Loss per common share:
Net loss per common share	$	(0.05	)	$	(0.07	)	$	(0.02	)	$	(0.17	)
Diluted net loss per common share	$	(0.05	)	$	(0.07	)	$	(0.02	)	$	(0.17	)
Weighted average shares outstanding	29,670			29,262			29,629			29,245
Diluted weighted average shares outstanding	29,670			29,262			29,629			29,245

5

Veeco Instruments Inc.

Reconciliation of operating (loss) income to earnings excluding certain charges

(In thousands, except per share data)

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2004			2003			2004			2003
Operating (loss) income	$	(412	)	$	(1,757	)	$	5,355		$	(3,300	)
Adjustments:
Amortization expense	4,336			3,262			13,807			9,563
Restructuring expense	—			1,804		(1)				3,261		(1)
Purchase accounting adjustments	—			—			1,498		(2)	—
Earnings excluding certain charges before interest, income taxes and amortization (“EBITA”)	3,924			3,309			20,660			9,524
Interest expense, net	1,793			2,050			6,231			5,703
Earnings excluding certain charges before income taxes	2,131			1,259			14,429			3,821
Income tax provision at 35%	746			441			5,050			1,337
Earnings excluding certain charges	$	1,385		$	818		$	9,379		$	2,484
Earnings excluding certain charges per diluted share	$	0.05		$	0.03		$	0.31		$	0.08
Diluted weighted average shares outstanding	29,953			29,591			30,154			29,487

(1) The $1.8 million restructuring charge in the third quarter of 2003 and the $3.3 million restructuring charge for the nine months ended September 30, 2003 is comprised of severance costs relating to the reduction in work force announced in the fourth quarter of 2002.

(2) The $1.5 million in purchase accounting adjustments for the nine months ended September 30, 2004 is for the required adjustments to gross profit to reflect the required capitalization of profit in inventory and permanent elimination of certain deferred revenue from the TurboDisc and Aii acquisitions.

NOTE - The above reconciliation is intended to present Veeco’s operating results, excluding certain charges and providing income taxes at a 35% statutory rate. This reconciliation is not in accordance with, or an alternative method for, generally accepted accounting principles in the United States, and may be different from similar measures presented by other companies. Management of the Company evaluates performance of its business units based on EBITA, which is the primary indicator used by management to plan and forecast future periods. The presentation of this financial measure facilitates meaningful comparison with prior periods, as management of the Company believes EBITA reports baseline performance and thus provides useful information.

6

Veeco Instruments Inc.

Reconciliation of GAAP loss to earnings excluding certain charges

(In thousands, except per share data)

(Unaudited)

	Earnings Guidance Three months ended December 31,
	2004			2004
GAAP BASIS
Net sales	$	93,000		$	100,000
Operating loss	(4,438		)	(2,358		)
Interest expense, net	2,355			2,355
Loss before income taxes	(6,793		)	(4,713		)
Income tax benefit	2,310			1,602
Net loss	$	(4,483	)	$	(3,111	)
Loss per share	$	(0.15	)	$	(0.10	)
Excluding Certain Charges
Net sales	$	93,000		$	100,000
Operating loss	(4,438		)	(2,358		)
Adjustments:
Amortization expense	4,358			4,358
Restructuring and rationalization expense	5,000			5,000		(1)
Earnings excluding certain charges before interest, income taxes and amortization (“EBITA”)	4,920			7,000
Interest expense, net	2,355			2,355
Earnings excluding certain charges before income taxes	2,565			4,645
Income tax provision at 35%	898			1,626
Earnings excluding certain charges	$	1,667		$	3,019
Earnings excluding certain charges per diluted share	$	0.05		$	0.10
Weighted average shares outstanding	30,000			30,000
Diluted weighted average shares outstanding	30,500			30,500

(1) The $5 million restructuring and rationalization charge in the fourth quarter of 2004 represents the midpoint of the range of charges Veeco expects to incur.  This is comprised of approximately $2.5 million in costs related to future spending reductions and $2.5 million in product rationalization costs and in-process R&D writeoffs relating to the MTI acquisition.

NOTE - The above reconciliation is intended to present Veeco’s forecasted operating results, excluding certain charges and providing income taxes at a 35% statutory rate. This reconciliation is not in accordance with, or an alternative method for, generally accepted accounting principles in the United States, and may be different from similar measures presented by other companies. Management of the Company evaluates performance of its business units based on EBITA, which is the primary indicator used by management to plan and forecast future periods. The presentation of this financial measure facilitates meaningful comparison with prior periods, as management of the Company believes EBITA reports baseline performance and thus provides useful information.

7

Veeco Instruments Inc.

Condensed Consolidated Balance Sheets

(In thousands)

	September 30, 2004		December 31, 2003
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	110,981	$	106,830
Accounts receivable, net	81,698		69,890
Inventories	123,885		97,622
Prepaid expenses and other current assets	9,866		15,823
Deferred income taxes	32,680		24,693
Total current assets	359,110		314,858
Property, plant and equipment, net	73,586		72,742
Goodwill	79,947		72,989
Long-term investments	8,043		12,376
Deferred income taxes	15,328		18,136
Other assets, net	94,370		105,363
Total assets	$	630,384	$	596,464
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	35,343	$	19,603
Accrued expenses	47,074		31,616
Deferred profit	2,638		2,140
Current portion of long-term debt	348		333
Income taxes payable	4,173		3,700
Total current liabilities	89,576		57,392
Long-term debt	229,671		229,935
Other non-current liabilities	2,885		2,808
Total non-current liabilities	232,556		232,743
Shareholders’ equity	308,252		306,329
Total liabilities and shareholders’ equity	$	630,384	$	596,464

8